Stockman’s Corner

Keynesian economists in the US have done their best to obfuscate the Fed’s culpability for the burned out industrial zone dotting Flyover American from coast to coast. Along with their nonchalance about China’s mountainous internal debt (about $50 trillion counting financial debt), a much used canard is the claim that China’s ultra-dirty float mainly reflected […]

The re-channeling of the Fed’s inflationary money-pumping from main street to Wall Street gave rise to Twin Big Lies. Namely, that the Friedman formula about too much money chasing too few goods was obsolete, and that the soaring paper wealth being generated in asset markets was real, sustainable and a sign of resurgent capitalist prosperity.

As we argued last week, there is no way to understand the virulent all sectors inflation that has overcome the American economy apart from the fulcrum financial event of modern times. That is, Richard Nixon’s scrapping of the Bretton Woods monetary arrangement and the dollar’s last link to gold at Camp David in August 1971.

By Greg Hunter’s USAWatchdog.com Reagan White House Budget Director and best-selling author David Stockman says, “This is not the time to be invested in the markets . . . . A reset is just a pleasant name or a clinical name for a crash of epic proportions, which we will have because the markets are

This headline from the WSJ was certainly revealing. It attributes rationality to liquidity-besotted trading in the bond pits that has nothing to do with anything, except whether at any given moment the momo pack has gone student body-left or student body-right.

As we showed last week, there is an extra $60 trillion of household assets hanging around the US economy and that didn’t happen by the economic equivalent of immaculate conception. It’s the product of the Fed’s unhinged money printing spree over the last three decades and amounts to gross inflation of financial assets.

June retail sales allegedly rose at a booming +15.6% YoY rate, thereby reminding us once again that just because you can look it up on Bloomberg doesn’t make it true. Actually, inflation-adjusted retail sales have fallen at a -13.5% annual rate since the March peak.

The Fed’s balance sheet crossed the $8.2 trillion mark this week, up a staggering $105 billion from, well, last week!

We have set the 100.0 fulcrum point on the chart below at Q4 1965 because it tells you all you need to know about your grandfather’s inflation. During the previous 14 years, real GDP grew at 3.9% per annum, and that occurred at a time when both the Fed and consumer inflation were well behaved.

There is no way to understand the virulent all sectors inflation that has overcome the American economy apart from the fulcrum financial event of modern times. That is, Richard Nixon’s scrapping of the Bretton Woods monetary arrangement and the dollar’s last link to gold at Camp David in August 1971.